A move by financial services giant Sagicor to relocate its headquarters from Barbados because of the country’s declining sovereign rating spells “disaster” for this island.
That assessment from former prime minister and trained economist Owen Arthur, as Sagicor Financial Corporation’s Group President Dodridge Miller confirmed the company’s board agreed to move its country of domicile, possibly by the end of this year.
Standard & Poor’s (S&P) lowered Barbados’ sovereign rating to “B” from “BB-” on December 19, and 11 days later the ratings agency downgraded Sagicor Life’s rating from “BB+”, to “BB-” and Sagicor Finance Ltd’s US$150 million 10-year senior unsecured note to “B” because “ratings on life insurers are capped at two notches above the sovereign rating of the country of domicile”.
S&P had also informed Sagicor that its rating could be upgraded if it completed plans to relocate to a country with at least investment grade ratings, strong regulations and adequate access to funding.
Miller told the Business Guardian newspaper in Trinidad and Tobago that the move from Barbados had already been given the board’s nod.
“The board has agreed on a recommendation from the management that Sagicor Financial Corporation has to re-domicile from Barbados to a jurisdiction that is rated investment grade or higher and where access to capital would be reasonably easy and flexible,” Miller said, noting that because of Barbados’ continuing downgrades and the possibility of similar future action, his company had been considering for some time whether it was strategic, in the long-term, to remain in Barbados where the likelihood of it being upgraded in the short-term was “pretty remote”.
He noted that a special meeting of Sagicor’s shareholders must still be convened for a vote on the proposed move.
The top executive said that apart from Trinidad – where the majority of shareholders reside – other possible domiciles for relocation are the United States and London.
“As you know, we are listed on the Barbados Stock Exchange with secondary listings in London and Port-of-Spain. We have to evaluate where is the right place to re-domicile to, and when,” he said.
Arthur told Barbados TODAY that the move would hurt the country and he hoped it could be averted.
“This is the ultimate culmination of the country’s financial affairs being so run that the sovereign rating has been reduced to less than investment grade,” he said.
Arthur warned that other enterprises with headquarters in Barbados would have a difficulty continuing to function here if the country’s creditworthiness was not restored.
“The time is upon us for the Government to recognize that contrary to soundings from the Central Bank and others, that ratings matter and that everything that is necessary to restore the credit rating of this country has to be a priority, and it has to be pursued in a coherent, cohesive and successful manner,” said the former minister of finance.
Lamenting the current state of affairs, he said he saw Sagicor as the representation on the global stage of what an enterprise of Barbadian origin can and should be.
The independent MP for St Peter and former Opposition Leader said he hoped that this latest development would force Government to recognize that the management of fiscal deficits was at the core of economic management of a country with a fixed exchange rate.
“I remember having been invited as Prime Minister to the launch of Sagicor on the London Stock Exchange . . . and with all Barbadians and members of Sagicor, I was soaring on the wings of pride. So to now move Sagicor’s headquarters is a disaster and I hope it is something that could be averted,” Arthur said.
Sagicor has been headquartered in Barbados for 175 years.
The company had acquired the top S&P benchmark rating of “BBB” in 2006, when the Barbados Government was then ranked as an investment grade sovereign state at “BBB+”.